Understanding the process of regeneration has been one of the longstanding scientific aims, from a fundamental biological perspective, as well as within the applied context of regenerative medicine. Because regeneration competence varies greatly between organisms, it is essential to investigate different experimental animals. The free-living marine flatworm Macrostomum lignano is a rising model organism for this type of research, and its power stems from a unique set of biological properties combined with amenability to experimental manipulation. The biological properties of interest include production of single-cell fertilized eggs, a transparent body, small size, short generation time, ease of culture, the presence of a pluripotent stem cell population, and a large regeneration competence. These features sparked the development of molecular tools and resources for this animal, including high-quality genome and transcriptome assemblies, gene knockdown, in situ hybridization, and transgenesis. Importantly, M. lignano is currently the only flatworm species for which transgenesis methods are established. This review summarizes biological features of M. lignano and recent technological advances towards experimentation with this animal. In addition, we discuss the experimental potential of this model organism for different research questions related to regeneration and stem cell biology.